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AB Value Partners, LP v. Kreisler Manufacturing Corp.

Court of Chancery of Delaware

December 16, 2014

AB VALUE PARTNERS, LP, Plaintiff,
v.
KREISLER MANUFACTURING CORPORATION, a Delaware corporation, EDWARD A. STERN, JOHN W. POLING, SR., and MICHAEL D. STERN, Defendants.

Submitted: December 12, 2014.

Marcus E. Montego, Esq., John G. Day, Esq., PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Attorneys for Plaintiff.

Larry R. Wood, Jr., Esq., Elizabeth A. Sloan, Esq., BLANK ROME LLP, Wilmington, Delaware; Attorneys for Defendants.

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

Plaintiff, AB Value Partners LP ("AB Value"), requests that this Court issue a temporary restraining order ("TRO") enjoining the advance notice bylaw of Defendant Kreisler Manufacturing Corporation ("Kreisler" or the "Company") so that AB Value can run a competing slate of directors at Kreisler's annual stockholder meeting on December 18, 2014. For the reasons that follow, I deny Plaintiff's motion for a TRO.

I. BACKGROUND

A. The Parties and Other Relevant Actors

AB Value is an activist hedge fund that, together with its affiliates, owns a roughly 11.1% stake in Kreisler.[1] AB Value seeks to run a dissident slate of directors at Kreisler's 2014 annual meeting.

Defendant Kreisler is a Delaware corporation whose shares trade on OTC Pink Sheets. It is a relatively small manufacturing company in the aeronautics industry. The Company's board of directors (the "Board") consists of four members, two of whom are independent directors. Three members of the Board are named as defendants.

Defendants Michael D. Stern and Edward A. Stern are brothers and run the Company together. They each hold the role of Co-President. Edward Stern is also the Chief Corporate Officer and the Corporate Secretary. Michael Stern is the Chief Executive Officer and the Treasurer. Both are directors of the Company. Each owns 12.2% of the Company's stock.[2] For convenience, I will refer to them in their collective corporate roles as the "Stern Management." Part of this dispute revolves around a proposal by the Stern Management to substantially increase their pay.

Defendant John W. Poling is an independent director on the Kreisler Board. He owns less than one percent of Kreisler's stock.[3]

Joseph P. Daly also is an independent director on the Kreisler Board. At 19.3%, he is Kreisler's largest stockholder.[4] Daly is the only director not named as a defendant.

B. Factual Overview and Procedural History

AB Value seeks to nominate its own slate of directors for election at Kreisler's annual stockholder meeting, scheduled to be held on December 18, two days from now. Kreisler's bylaws contain an advance notice bylaw (the "ANB") that reads, in relevant part:

No business may be transacted at an annual meeting of stockholders other than business that is . . . otherwise properly brought before the annual meeting by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 12.
In addition to any other applicable requirements . . . such stockholder must have given timely notice [of an intent to run a slate of candidates for directors] in proper written form to the Secretary of the corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholder.[5]

The anniversary date of the 2013 annual meeting is December 17, 2014.[6] Thus, pursuant to the terms of the ANB, Plaintiff needed to submit its nominees no earlier than September 18, 2014, and no later than October 18. It is undisputed that ...


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